The Hindu : TIIC seeks capital infusion for SFCs

Online edition of India's National Newspaper
Saturday, Apr 26, 2003

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TIIC seeks capital infusion for SFCs

By Our Special Correspondent

CHENNAI April 25 . The Tamil Nadu Industrial Investment Corporation (TIIC) wants the Union Government to provide "bail out" capital infusion to State Financial Corporations (SFC) at least selectively, on the basis of their ratings.

The Centre has turned down the State request that the SFCs, being premier support institutions for the small and tiny sectors, be extended the kind of assistance given to the Unit Trust of India and banks, which too had incurred huge losses. Following a "no" from the Centre, Tamil Nadu has suggested support be provided at least for those SFCs, which passed a rating parameter, said D. Sabitha, TIIC Managing Director.

Addressing a meeting organised here by the Tamil Nadu Small and Tiny Industries Association (TANSTIA) on the "Gupta Committee recommendations on the SSI sector and employment generation", Ms. Sabitha said, in the presence of S.P. Gupta, Planning Commission member, who headed the committee, the TIIC had already reached an understanding with the Small Industries Development Bank of India, whereby it would extend refinance credit on "differential" terms to the TIIC on the basis of "gradation" of the corporation. The State Government, would, on its part, convert its loans to the corporation into equity.

Ms. Sabitha said an analysis of the TIIC lending pattern over a five-year period had shown a sharp increase for small transport operators (to the extent of 40 per cent of all TIIC advances) and a decrease for manufacturing units. This was because of mounting NPAs (non-performing assets or defaults) of manufacturing units. "If SFCs like the TIIC (which had been set up even before the SFCs Act was passed by Parliament in the 1950s) are not strengthened, it will deal a blow to financing of first generation entrepreneurs."

Ms. Sabitha also called attention to the traditional neglect of "mentoring" of entrepreneurs and said the TIIC had entered into an arrangement with the Bharat Yuva Shakti Trust and the TANSTIA-FNF Service Centre to ensure that entrepreneurs were guided by experienced industrialists and professionals either freely or for an honorarium.

(Later, Dr. Gupta said the Planning Commission itself had recommended that SFCs be assisted selectively.)

S. Rajarethinam, Managing Director, Tamil Nadu Small Industries Development Corporation, said the programme of Central and State grant for common effluent treatment plants, now available to the leather sector, should be extended to all industrial estates established by State corporations.

New policy for SSI

D. Rajendran, Secretary-SSI, Tamil Nadu Government, said a new policy for the small sector would be announced next month. Under the New Anna Marumalarchi Thittam, which focussed on areas promising rural employment and market potential such as food processing, herbal medicines, biotechnology and information technology, 12 units had started production by March 31, 2003, and 53 were negotiating financial assistance with banks and the TIIC.

The scheme for grant of composite loans (viz. working capital-cum-term loan), launched recently by the SIDCO and the National Small Industries Corporation, was the only one, under which loans up to Rs. 25 lakhs could be obtained without collateral.

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